– Good morning from a very wet and somewhat cyclonic Sydney.
– Stocks ambled their way through the overnight session with a lack of economic data ensuring modest moves. US markets finished mixed, the DJIA and S&P 500 recorded modest falls, weighed down by disappointing earnings results, although the tech-heavy Nasdaq managed to buck the trend putting on close to 0.4%. In Europe, markets continued their recovery from Friday’s sharp sell off, although reflective of a lack of leads, moves were limited in nature.
– Remember the US stock “flash crash” of 2010? The violent sell off in US stock markets that occurred in the space of just a few minutes? Well, after five long years the US CFTC believe they know who was responsible. Navinder Singh Sarao, a commodities trader based in London, was arrested overnight in connection with the mysterious market plunge that saw the DJIA lose around 1,000 points in just a matter of minutes. According to the CFTC, Sarao spoofed S&P futures, called “E-Minis,” from 2010 to 2014 using a special algorithm called a “layering algorithm” to push out multiple large sell orders that would modify themselves to move with the E-Minis price. Allegedly, the layers of orders would increase the spread between bid and the asking price so that other traders would stay away from the best price. Sarao would then cancel the sell orders, according to the CFTCs complaint.
– Bill Gross of Janus Capital Group believes that selling the 10-year German bund is “the short of a lifetime” – but not until September 2016 when the ECB ends it current quantitative easing program. Gross believes the trade has the potential to deliver greater returns than when renowned investor George Soros “broke the Bank of England” via shorting the British Pound (GBP) back in 1992.
– Australia’s Q1 consumer price inflation (CPI) report is the undisputed highlight on today’s Asian economic calendar. Headline CPI is expected to show a quarterly increase of 0.2% leaving the annual rate at just 1.2%. Core CPI — watched closely by the RBA — is expected to have grown 0.6% during the quarter leaving the annual increase at 2.2%, a level towards the bottom of the RBA’s 2-3% target band. Not only will the release have implications for monetary policy but also the near-term path for the Australian Dollar. Given it’s current level a weak reading may see the AUDNZD test parity during Wednesday’s session.
– Aside from Australian CPI, markets will receive Japanese trade data for March along with the latest Conference Board leading index from China. Later this evening we’ll also receive existing home sales, the latest MBA mortgage market index and EIA crude inventory stockpiles from the States, the minutes of the Bank of England’s April monetary policy meeting along with Italian retail sales.
Here’s the market scoreboard from overnight:
* DOW 17,949.59 -85.34 (-0.47%)
* S&P 500 2,097.29 -3.11 (-0.15%)
* Nasdaq 5,014.10 +19.50 (+0.39%)
* Euro STOXX 50 3,544.41 +7.06 (+0.20%)
* UK FTSE 7,062.93 +10.80 (+0.15%)
* German DAX 11,939.58 +47.67 (+0.40%)
* EURUSD 1.0730
* USDJPY 119.69
* GBPUSD 1.4923
* USDCAD 1.2276
* AUDUSD .7706
* AUDNZD 1.0058
* Gold $1,201.70 +$9.40 (+0.79%)
* Silver $15.92 +$0.12 (+0.75%)
* Copper $2.69 -$0.03 (-1.11%)
* WTI Crude $55.58 -$1.12 (-1.99%)
* Iron Ore $51.04 -$0.53 (-1.03%)
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day:
FlexiGroup Limited ( fxl.asx)
Yesterday’s low in FlexiGroup represented a 14% decline from its peak in early March. This correction sees the finance group trading on what looks like a pretty undemanding multiple of about 10 times F16 earnings.
FlexiGroup’s first half results achieved 9% profit growth in a time of relatively moderate credit growth. It’s likely to have upside if and when we eventually get the much awaited upturn in business investment.
Yesterday’s strong close looked like a rejection of a couple of AB=CD patterns as I’ve outlined on the chart below. It also saw the stock push back up through its 200 day moving average after a brief flick below it.
Provided the FlexiGroup can consolidate above Monday’s low, the completion of these AB=CD patterns creates the potential for a rally to follow.
Ric Spooner, chief market analyst, CMC Markets.
You can follow Ric on Twitter @ricspooner_CMC